Indiana legislators will leave it up to Gov. Eric Holcomb’s administration to decide whether to levy a $50 million transfer fee on Caesars Entertainment Corp.’s acquisition of Centaur Gaming LLC—a fee the company says could derail a major project it has planned at Horseshoe Southern Indiana casino.
The staff of the Indiana Gaming Commission, which regulates casinos, has said the fee applies to the Las Vegas-based gambling company's $1.7 billion acquisition of Indianapolis-based Centaur and its racinos in Anderson and Shelbyville.
The gaming commission's board members will make the final call, probably in May or June, when they review the deal. But Caesars has threatened that it won’t pursue a separate $90 million project at Horseshoe Southern Indiana if the transfer fee is levied.
A lawyer for the group told the commission staff that Caesars would have to “reconsider the entire investment” at the Harrison County property—one of two casinos it already owns in the state, along with the Horseshoe Hammond Casino in northwest Indiana—if that happens.
Legislators, who could have voted to waive the fee, have opted not to weigh in.
Key lawmakers told IBJ on Wednesday, the last day of the 2018 legislative session, that there simply was not enough time to deal with the issue legislatively before the session adjourned.
House Ways and Means Chairman Tim Brown, R-Crawfordsville, said there was “no language in any bill anywhere I’ve seen” to address the issue.
Rep. Terri Austin, D-Anderson, said the transfer fee has “been spelled out in the statute for several years.” She said she wondered why the fee “came as a surprise” to the companies.
“The issue was raised too late in the legislative process,” Anderson said. “This is something the administration is going to have to make a decision about.”
According to state law, the initial casino license holder is required to pay a $50 million transfer fee when the controlling interest in the license is sold. The law has a few exceptions that would waive the fee, including a transfer resulting from bankruptcy by the initial license holder.
In this case, the initial license holders for Hoosier Park and Indiana Grand were Hoosier Park LP and Indianapolis Downs LLC, respectively. Centaur was the parent company for Hoosier Park LP.
In 2010—two years after the licenses were issued—Centaur filed for Chapter 11 bankruptcy. The bankruptcy plan created new entities to oversee Centaur’s holdings. That included transferring the license for Hoosier Park from Hoosier Park LP to Hoosier Park LLC. The $50 million transfer fee did not apply at that time because the arrangement was a result of Centaur's bankruptcy.
During the gaming commission hearing for the Hoosier Park fee, Centaur asked the commission to include a provision in the order that stated the fee would not apply to future transfers, but the commission denied that request.
In April 2011, Indianapolis Downs LLC also filed for Chapter 11 bankruptcy, and in 2013, Centaur acquired the license and rights to Indiana Grand for $500 million. The $50 million fee also did not apply to that transaction because it again involved the initial license holder, in this case Indianapolis Downs, filing for bankruptcy.
Caesars has argued the fee should not apply now because its deal does not involve the racinos' initial license holders.
State Rep. Sean Eberhart, R-Shelbyville, said he also doesn't believe the fee should be levied on the company, in part because the deal will bring “a ton more capital investment and it’s good for the state." But he said the issue came to the Legislature too late to act on it.
“I wish we would have had more time to work on the issue and maybe we could have done something legislatively, but it’s too late to do something at this point,” Eberhart said. “It’s a combination of not having enough time and it’s a little difficult to do something while this transaction is happening. It would be a little odd with the timing.”
Austin said the controversy about the fee creates a fairness issue.
“If other folks have had to pay a transfer fee, do you say one gets treated differently than the other?” Austin said.
She also said the issue requires balance. On one hand, Austin said, “$50 million is a lot of money, money we could put toward preschool, or we could use it to supplement workforce development.”
On the other, she said, “nobody wants to see any industry treated unfairly, and casino entities already pay substantial taxes.”